Monday, March 14, 2011

A Market Oracle Miss-Speaks

“Because the Lord helps those who help themselves, the hard-working person is seen as part of a productive economy. This economy rests on the combination of God's providence and hard work. While Adam Smith's famous invisible hand persuaded some intellectuals for a century or so, 1776–1875, the general public assumed that there really is an invisible hand guiding the process of productivity. This legitimized every man's labor.”

CommentGary North is quite mistaken. The period from 1776 when Adam Smith used the invisible hand metaphor (IH metaphor) in Wealth Of Nations (only once, though he had also used it before (once only) in Moral Sentiments in 1759), to a century later in 1875, is distinguished by the fact that hardly anybody – intellectuals, ‘famous’ or otherwise – referred to it. We know this because I have challenged several dedicated scholars (of impeccable reputations as intellectuals) to list them and the result has been pathetically few.

They have singularly failed to discover more than a small handful – in fact two only between 1776 and 1856 – and a few in the period confined to the 1780s – 1900. The IH metaphor appeared in the oral tradition at Cambridge (UK) and a few lecturers at Chicago (USA) (according to Paul Samuelson when he was an undergraduate there), but the IH metaphor seldom appeared in print in economics texts or journal articles (but see two prominent examples: Arthur Pigou’s Welfare Economics,1922 and, Alexander Grey’s 1930 text, The Development of Economic Doctrine) until the post-war decades, primarily following Paul Samuelson’s wildly successful Economics: an introductory Analysis (1948 and the 19 editions to 2010).

What Garry North means by the “the general public assumed that there really is an invisible hand guiding the process of productivity”, or when they assumed this is not clear, but if he refers to the period 1776-1875 (or even the period 1875-1960) he is quite wrong.

However, after Oscar Lange (1938 and 1947) and Paul Samuelson (1948) introduced the IH metaphor – labeling it as Adam Smith’s ‘famous’ metaphor – and their works, particularly Samuelson’s – which reached a widespread public as a popular Economics 101 (and Economics 101-plus) university text – which was copied as Adam Smith's metaphor into hundreds of other author's texts, and then, as the millions of graduates spread out into public life, the media, and across the world, so the IH metaphor acquired traction in popular public discourse.

[To sample the modern phenomena of the ubiquitous IH metaphor, take ‘Google Alerts’ for a week or two …]